S&P 500 Plunges Near 50-Day Moving Average...Will It Collapse Due to Tech Stock Sell-off?

▲ Bear market, sell-off/AI generated image

The S&P 500 Index (SPX) has fallen to the brink of breaking its 50-day moving average, standing at a critical juncture that will determine whether the U.S. stock market undergoes further correction.

According to MarketWatch on June 25 (local time), the S&P 500 Index barely stayed above its key support level, the 50-day moving average, by less than 1 point at Thursday's market close. Analysis suggests that if this support level breaks, the U.S. stock market could face further losses in the coming days and weeks.

The tech-led weakness is already weighing on the broader market. The Nasdaq Composite (COMP) fell below its 50-day moving average earlier this week, and both the S&P 500 and Nasdaq Composite had declined for four consecutive days by Thursday. The Nasdaq-100 (NDX), which has a higher concentration of large-cap tech stocks, is also on the verge of breaking the same trendline.

MarketWatch reported that investors might consider expanding their defensive strategies now. The 50-day moving average is a key technical indicator for gauging short-term trends, and it has acted as a support level where buying interest re-emerges during bull markets. Conversely, if this line breaks, the market could interpret it as a sign of weakening trend rather than a mere correction.

Recently, the U.S. stock market has seen increased volatility as the stable uptrend from April to early June faltered. In particular, the "Magnificent 7" large-cap tech stocks, including Microsoft (MSFT), NVIDIA (NVDA), Alphabet (GOOGL), Tesla (TSLA), Amazon (AMZN), Meta Platforms (META), and Apple (AAPL), lost over $3 trillion in market capitalization since June, increasing downward pressure on the index.

However, the market as a whole has not collapsed unilaterally. The Dow Jones Industrial Average (DJIA) closed up 71.72 points at 51,920.62, marking its second-highest close ever. In contrast, the S&P 500 Index saw a slight decline to 7,357.49, and the Nasdaq Composite closed down 0.5% at 25,358.60, clearly showing fatigue centered around large-cap tech stocks.

Wall Street's attention is now focused on whether the S&P 500 Index can hold its 50-day moving average. If this support level breaks, the tech stock sell-off could spread across the broader market, and the rotation of funds into defensive and value stocks could intensify. The key to a short-term rebound lies in the stabilization of the Magnificent 7's decline and the S&P 500's ability to defend its 50-day line.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*